Credit Crunch Update - Stocks plunge amid Wall St crisis...

From FTAlphaville: US stocks suffered their biggest one-day decline on Monday since the market reopened after the terrorist attacks of Sept 11, 2001, as investors sought the safety of cash and government debt following the historic collapse of Lehman Brothers, the emergency sale of Merrill Lynch to Bank of America and the deepening crisis at insurance giant AIG.

The upheavals left investors more concerned with preserving their capital than in generating returns. The S&P fell 4.7% while in Europe the FTSE 100 fell nearly 4%, and on Tuesday, Asian stocks tumbled. Yields on short-dated US government debt collapsed to well below 1% amid frenzied buying.

The Fed battled to shore up the overnight money market, where the federal funds rate briefly hit 6% - three times the target rate of 2% - injecting a total of $70bn in liquidity before the fed funds rate fell back. The US central bank meets Tuesday amid speculation it could cut rates by 25 or even 50bp. But unless market chaos escalates further, the Fed is likely to hold rates while leaving the door open to future cuts. Oil closed well below $100 a barrel, but the dollar rallied against the euro and sterling. Source

US bank sector faces further closures (video)
From Cantos.com: As Lehman fails and Merrill Lynch finds a buyer, the US banking sector will face further rationalisation - according to David Buik, BGC Partners. (w3.cantos.com)

Last men standing - Goldman Sachs and Morgan Stanley face questions
From timesonline.co.uk: As the only two independent Wall Street brokerages standing, Goldman Sachs and Morgan Stanley will face a barrage of questions at their third quarter announcements this week. Some experts believe that, in a climate of panic in which clients, trading partners and lenders are becoming increasingly wary of brokerages, it is only a matter of time before the two groups melt down or are snapped up.

Source:
Credit Crunch Update - Stocks plunge amid Wall St crisis

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